Can Tennessee state or local governments use Construction Management-at-Risk contracts (where the construction manager also performs some of the actual construction work) for jail and prison projects?

Plain-English summary

Senator Mark Norris asked whether the State, counties, cities, towns, or metropolitan governments can use "Construction Management-at-Risk Services" contracts to build local correctional facilities. As defined in the request, those contracts include three features: (1) trade contractors work as subcontractors of the construction manager, (2) the construction manager is not required to publicly bid or award the subcontracts, and (3) the construction manager may itself perform some or all of the actual construction work.

The AG concluded no. Tenn. Code Ann. § 12-4-107(b) is the specific statute for correctional facility construction. It allows state and local governments to hire a construction manager only as an "agent or advisor," not as a self-performing builder. The statute expressly prohibits a "construction manager from undertaking actual construction work on a project over which the construction manager coordinates or oversees the planning, bid or construction phases," subject to one narrow exception: when bids have been solicited twice and none have been submitted, the construction manager may, on a showing of good faith, provide the construction services for a price agreed upon by the manager, owner, and architect. The statute also requires that construction work performed under the manager's oversight "shall be procured through competitive bids," with sealed bids opened and bidder names and amounts announced publicly.

Construction Management-at-Risk Services as the requestor described them break both of those features: the manager self-performs construction and bypasses public bid disclosure. So those contracts are not permitted under § 12-4-107(b). The AG added that even if another general statute could be read to allow at-risk arrangements for public projects, § 12-4-107(b) is narrowly tailored to correctional facilities and would control as the specific provision. Keough v. State, 356 S.W.3d 366, 371 (Tenn. 2011).

Currency note

This opinion was issued in 2017. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

What "Construction Management-at-Risk" means in this opinion. The requestor's definition, which the AG accepts for analysis, has three elements:

1. Trade contractors are subcontractors to the construction manager.
2. The construction manager is not obligated to publicly bid or award the subcontracts.
3. The construction manager may itself perform some or all of the actual construction work.

This contrasts with the "agent" or "advisor" model in which the manager coordinates and oversees the project but does not build it.

Tenn. Code Ann. § 12-4-107(b)(1). Authorizes the State, counties, cities, towns, and metropolitan governments to "contract for construction management agent or advisor services" for correctional facility projects. The statute does not define "agent services," "advisor services," or "construction manager." But it expressly prohibits the construction manager from "undertaking actual construction work on a project over which the construction manager coordinates or oversees the planning, bid or construction phases," subject to one narrow exception in special circumstances (twice-solicited bids, no responses, good-faith effort, agreed-upon price among manager, owner, and architect).

Tenn. Code Ann. § 12-4-107(b)(3). Construction work under the manager's coordination and oversight "shall be procured through competitive bids." Sealed bids must be opened and bidder names and amounts "openly announced."

The statutory model: agent or advisor, plus open bidding. The construction management services contemplated for correctional facility projects are limited to coordinating and overseeing the planning, bid, and construction phases. The actual construction is then procured through public bidding. The construction manager is not the builder.

The Construction Management-at-Risk model breaks both rules. It contemplates the manager self-performing construction and does not require public bidding of subcontracts. As described, those contracts cannot satisfy § 12-4-107(b).

Specific controls general (Keough v. State). Even if another statute could be read more broadly to permit at-risk arrangements for public projects, the narrowly tailored § 12-4-107(b) for correctional facilities would govern. Keough v. State, 356 S.W.3d 366, 371 (Tenn. 2011) (a special statute prevails over a general provision in another statute).

Common questions

Q: Can a Tennessee county use a Construction Management-at-Risk contract to build a new jail?
A: According to this opinion, not as described in the question. § 12-4-107(b) requires the construction manager to act as an agent or advisor (not as the builder), and it requires the actual construction work to be procured through public competitive bids.

Q: Is there any situation where the construction manager can build the project?
A: One narrow exception in § 12-4-107(b)(1): if the project has been put out for bid twice and no bids were received (with a good-faith effort), the construction manager may provide that portion of the construction work at a price agreed upon by the manager, owner, and architect.

Q: Does § 12-4-107(b) apply only to county jails, or also to state correctional facilities?
A: The statute applies to "[c]onstruction of correctional facility projects of the state, a county, city, metropolitan government or town." So both state and local correctional facility construction fall under it.

Q: What if another general procurement statute allows at-risk contracts?
A: According to this opinion, § 12-4-107(b) would still control for correctional facility projects because it is the specific provision. Keough v. State sets out the canon that a special statute prevails over a general provision.

Q: What is the difference between "construction management agent or advisor services" and Construction Management-at-Risk?
A: An agent or advisor coordinates and oversees the work but does not perform it; subcontracts go through public bidding. Under at-risk, the manager can self-perform construction work and award subcontracts privately. § 12-4-107(b) authorizes the first and not the second for correctional facility projects.

Citations and references

Statutes:

• Tenn. Code Ann. § 12-4-107(b)(1)
• Tenn. Code Ann. § 12-4-107(b)(3)

Cases:

• Keough v. State, 356 S.W.3d 366 (Tenn. 2011)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2017/op17-049.pdf

Original opinion text

Construction Management-at-Risk Services - Local Correctional Facility Projects

Question

Does Tenn. Code Ann. § 12-4-107 permit the State, counties, cities, towns, or metropolitan governments to solicit or receive proposals or to enter into contracts for "Construction Management-at-Risk Services" for the construction of local correctional facility projects or additions to existing correctional facility buildings?

Opinion

No. Since the "Construction Management-at-Risk Services" contracts in question contemplate that the construction manager may itself perform at least some of the construction work, such contracts would not be permitted under Tenn. Code Ann. § 12-4-107(b) for local correctional facility construction projects.

ANALYSIS

The request for this opinion specifies that the term "Construction Management-at-Risk Services" in the question refers to contractual arrangements under which trade contractors are subcontractors to the construction manager, the construction manager is not obligated to bid or award the subcontracts publicly, and the construction manager may itself perform some or all of the actual construction work.

Tennessee Code Annotated § 12-4-107(b) sets requirements specific to contracts for the "[c]onstruction of correctional facility projects of the state, a county, city, metropolitan government or town." The statute authorizes these governmental entities to "contract for construction management agent or advisor services" in connection with the construction of local correctional facility projects or additions to existing correctional facility buildings. Tenn. Code Ann. § 12-4-107(b)(1).

The statute does not define "construction management agent services" or "construction management advisor services," nor does it define "construction manager." However, it does expressly prohibit a "construction manager from undertaking actual construction work on a project over which the construction manager coordinates or oversees the planning, bid or construction phases of the project," with one very limited exception under special circumstances.¹ Tenn. Code Ann. § 12-4-107(b)(1). Moreover, the statute provides that construction work performed under the coordination and oversight of such a construction manager "shall be procured through competitive bids." Tenn. Code Ann. § 12-4-107(b)(3). Sealed bids for the actual construction work must be opened and the names of the contractors and their bid amounts must be openly announced. Tenn. Code Ann. § 12-4-107(b)(1).

Thus, the construction management agent or advisor services for which one of the specified governmental entities may contract do not include — with the one very limited exception — any actual construction work on a project. Rather, the construction management services are limited to coordinating and overseeing the planning, bid, and construction phases of the project. There is also a requirement for a bidding process, with the results made public.

The statute does not address "Construction Management-at-Risk Services" within the context of local correctional facility projects. But the requestor has used that term to mean services that include actual construction work performed by the construction manager itself and to include arrangements that do not necessarily require the open announcement of bidders and bidding amounts for the actual construction work.

Accordingly, a contract for the "Construction Management-at-Risk Services" in question here would not be permitted within the scope of Tenn. Code Ann. § 12-4-107(b). Section 12-4-107(b) only permits the State, counties, cities, towns, and metropolitan governments to enter into contracts for construction management agent or advisor services if — with one exception — the construction manager does not itself perform any of the actual construction work. Since the "Construction Management-at-Risk Services" contracts in question contemplate that the construction manager may itself perform at least some of the construction work, such contracts would not be permitted under Tenn. Code Ann. § 12-4-107(b) for local correctional facility construction projects.

If another statute could be read generally to permit a public entity to contract with an at-risk construction manager for projects, a court would likely conclude that Tenn. Code Ann. § 12-4-107(b) nevertheless governs because it is tailored narrowly and especially to correctional facility construction projects. See Keough v. State, 356 S.W.3d 366, 371 (Tenn. 2011) (the general rule of statutory construction is that a special statute will prevail over a general provision in another statute).

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

EUGENIE B. WHITESELL
Senior Counsel

Requested by:
The Honorable Mark Norris
State Senator
9A Legislative Plaza
Nashville, Tennessee 37243

¹ The exception applies only when bids have been solicited twice and no bids have been submitted. In that instance, if the construction manager can demonstrate a good faith effort was made in each bid solicitation to obtain bids, the construction manager may provide that portion of the actual construction services for a price agreed upon by the construction manager, owner, and architect. Tenn. Code Ann. § 12-4-107(b)(1).